One thing about DIY financial types: we’re goal-oriented. Patience helps, too, because solid financial planning is all about the long game. That’s why adding universal life insurance to part of a financial plan could make so much sense.
Universal life insurance combines sound insurance protection with policy values that provide a potential for savings. The key to that potential is compounding interest. As savvy investors know, time drives compounding, so it’s good to leave interest-bearing funds untouched for as long as possible.
When the time is right, though, you can decide to unlock the financial power in a universal life policy to live better during your life. You have the ability to use the money from your policy value, when and how you choose. Additionally, depending on the policy, the money you access from your policy value may be free from withdrawal penalties and taxes. However, it is important to understand that taking money from your policy value will reduce your policy value, may reduce your death benefit, and may cause the policy to lapse if additional payments are not made. Additionally, withdrawals may have certain tax consequences.
Curious about how you can use money saved in a universal life policy? Here are a few ideas:
A safety net for lost income
Life is full of surprises–the good and the not-so-much. Unexpected job loss can happen to nearly anyone, even the self-employed. Unemployment benefits, which vary widely from state to state, can help, but they’re no substitute for full-time work and a full-size paycheck. While you work to get back on your feet, your policy value can supplement any income shortfall.
To cover a big purchase
As you gain a little more freedom in life, maybe there’s a major purchase on your mind: Pay off your mortgage. Celebrate a special anniversary with a luxury cruise. Buy an RV or splurge on a classic car. You can do it! Simply use the money from your policy value to transform any dream into reality.
An income stream during retirement
How much money do you need to retire? That’s a complex question with no single answer. Many experts recommend that you plan for at least 80% of your pre-retirement income just to maintain your current lifestyle. Of course, from groceries and utilities to transportation and recreation, the costs of living will continue to rise. If you own a home, you should expect an increase in property taxes, too, as well as maintenance costs.
Retirement may also bring new expenses. For example, if you are in good physical health, the minimum age for Medicare is 65. If you retire early, you’ll need to cover health and medical expenses through private insurance or entirely on your own.
Once you leave the workforce, you can replace or supplement your income with funds from your universal life policy. Opt for a lump sum or a steady stream of cash, generally free from taxes and penalties.1 By using your policy value, you can leave your taxable retirement plans until you really need them. The same applies to federal programs. The older you are when you start collecting Social Security, the greater your monthly payments. Rely on your universal life policy for cash while you wait and Uncle Sam will reward your patience.
Remember, taking money from your universal life policy will affect your coverage amount and how long your policy remains active. In some cases, though, using a policy this way may be intentional. Flexibility and control are part of the appeal of universal life insurance.
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The information provided is general in nature, is not tailored to your needs, and is not intended to be tax or investment advice. For legal, investment, accounting, or tax advice, consult the appropriate professional. This information does not reflect the availability of products or product features unless specifically stated, nor does it alter the terms, conditions, exclusions, or limitations of policies issued by Security Benefit Life Insurance Company.